Breaking through MifIdII

Breaking through MifIdII

Debbie Nathan Market Insight

Carter Murray recently hosted an IR Society MifIdII discussion with an outstanding panel of experts to corner the market sentiments on this decisive subject matter – Robert Farringdon (Citi), Amani Korayeim (Institutional Investor), Marina Zakharova De Calero (Powerscourt & Head of IR McCarthy & Stone) and moderated by Emma Burdett (Maitland).

MifIdII fatigue was a creeping concern for us leading up to this event, however due to the continued ambiguity of the regulation itself, many related business functions across the market, from corporate brokers, to IR, to corporate access, to IR advisory were seeking a deeper understanding of what their peers were witnessing and experiencing. This led to an over-subscribed, packed out event which covered what we are seeing to date and how to prepare for what’s to come.

Increased Interaction

There have been many surveys in the industry across the last year that all point to a marked increase (sometimes as much as a quarter increase) in the number of investor meetings. Without a doubt those in the FTSE 250 will be feeling this more than those in larger companies in the FTSE 100, where IR teams are larger and budgets to expand IR teams are more readily accessible. There are those that feel that these ‘spikes in new roles’ are temporary reactions to the regulation, however we at Carter Murray believe that the face of IR and its specialism as a business unit is changing.

Corporates are taking advantage of a reduction of the ‘middle-men’ and taking back control of their dialogue with the market, brought about by a heightened level of direct interaction and higher expectations of transparency from investors. Amani from Institutional Investor has witnessed a clear behavioural change “the buy-side are clearly looking for other ways to access research. In 2017 46% was waterfront coverage equity research, in 2018 that has almost halved. At the same time, we can see an increase in independent research use, but interestingly a ~60% increase in attendance of industry and sector specific networking events and conferences.” Existing teams are coming under pressure not to erode value whilst picking up the pace at deeper and wider levels – IR teams are expanding to manage this change.

IR Expansion

In 2018 we saw a very buoyant IR resourcing market. We saw new roles from IPOs, a healthy FTSE 350 churn, but also a definite addition to resourcing to existing IR teams which has continued into 2019. However, concerns still lie amongst teams on increased role demands “investors are looking for educational insights on companies, market, sector and trends - IR needs to step into that space and fill information gaps” (Amani), which leads us to believe that more growth is yet to come.

Budgets are undeniably tight and where possible resourcing needs to be strategic. As MifIdII affects other functions, it has also created a buy product of many capital market entrants into the world of IR. Sell-side analysts and capital markets professionals are not only raising the remuneration bar, but also the strategic bar with financial qualifications, in-depth technical sector knowledge and close relationships with the key investors across many global markets.

IR – A specialised function

This strategic market focus is a welcomed and much needed string to the IR bow, however best practice IR must always be in place for the business to succeed in its overall IR programme. Direct engagement with investors requires IR teams to understand what drives those buy-side teams and thus how to shape their ongoing engagement. As previously mentioned, sell-side analysts are also reducing, adding to the importance of corporate communications and its intrinsic link with IR to maintain consistency of messaging and perception in the market. And if that wasn’t enough the digital age has brought about many new challenges in how the investor community would like to interact with management teams. Amani identifies that “Small-Mid companies need to increase the radius of communication using, among others, social media outlets.” Restricted access to management for many investors has meant an increase in alternative ways to interact with management teams – live webcasts of results and Q&A, deeper dive from ESG/SRI investors.

The global investor community is also producing a few ripples itself. MifIdII is a global consideration and as such a handful of the larger buy-side organisations have ‘beefed up’ their internal Corporate Access teams, for some introducing it as an entirely new specialised function. The buy-side are tightening up their act, time is literally money where access to management is concerned and fund managers and analysts will continue to seek out these new avenues to stay ahead of the market.

Change can be unsettling, but as we embrace it and meet it head on, we are seeing that corporates and investors could end up in a stronger position. Those ahead of game are investing in change, no matter how small, safe guarding the value of their businesses in turn. Carter Murray’s Investor Relations & Corporate Communications expert search consultants have a leading position in this market – contact a member of our team to talk through any part of the market.